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Two-Year Delay of Cadillac Tax Included in Spending Bill

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By Kristen Ricaurte Knebel

Dec. 16 — To the delight of many, a two-year delay of the Affordable Care Act's much maligned Cadillac tax is part of a year-end omnibus spending package unveiled by congressional leaders.

The $1.1 trillion government spending bill, which
was made public Dec. 16 and is set to be voted on by Congress this
week, also would make the excise tax on higher-cost health
plans—set to go into effect in 2018—deductible for employers.

While there's still a possibility the provision
could be excised from the final spending bill, it isn't likely
because of the broad support from Senate Democrats who back the
delay, Geoffrey P. Manville, a principal with Mercer LLC's
Washington Resource Group, told Bloomberg BNA.

The Alliance to Fight the 40—a group of
representatives from the employer community, unions and health
insurance companies that has been leading the charge for full
repeal of the tax—issued a news release urging Congress to approve
the two-year delay, to 2020, “as the first step toward full
repeal.”

Rep. Joe Courtney (D-Conn.), who was instrumental in
orchestrating the delay, told Bloomberg BNA he thinks pushing the
effective date back two years is a path toward full repeal of the
tax.

Next Administration's
Decision

“The two years obviously pushes this into the next
administration. If you look at all of the presidential candidates,
they have pretty much across the board shown no inclination to
defend the excise tax,” said Courtney, who introduced his own bill
to repeal the tax in April (H.R. 2050).

Courtney said he's not concerned about the cost of
delaying or repealing the Cadillac tax because he finds the
Congressional Budget Office's analysis of the tax to be fuzzy,
especially in later years of the projections.

The CBO has projected that the tax would generate
$87 billion in revenue over a decade, much of that from employers
shifting from nontaxable health-care benefits as they face the levy
to taxable wage increases.

“The CBO analysis is based on income replacement and
if you drill down deeper, they'll tell you it's not just wage and
salary replacement, it's also income that would go to a corporation
and at some point that gets really murky,” he said.

Additionally, the employer community found the CBO's
analysis of the Cadillac tax to be not only “murky,” but also
“far-fetched,” he said.

Manville said a delay of the tax would help the
chances for repeal and give everyone “a little more breathing
room.”

Kathryn Wilber, senior counsel for health policy
with the American Benefits Council in Washington, told Bloomberg
BNA that the delay would be a positive step toward repeal.

“I think this really will help employers in the
short term, but we'll still continue to work for repeal down the
road,” she said.

The delay also would be a “good thing” for employers
that have been struggling with how to deal with the tax, Vanessa A.
Scott, a partner at Sutherland, Asbill & Brennan LLP in
Washington, told Bloomberg BNA.

—With assistance from Nathaniel Weixel in
Washington.

To contact the reporter on this story: Kristen
Ricaurte Knebel in Washington at kknebel@bna.com

To contact the editor responsible for this story:
Phil Kushin at pkushin@bna.com

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